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Report: Town-owned electric utilities have better rates, service

By Sarah Favot, sfavot@lowellsun.com

Updated:
09/26/2011 06:35:40 AM EDT

At a time when prices at the gas pump have been rising and such grocery items as milk, bread and coffee have become more expensive, some residents are seeing a decrease in their monthly electricity bills.

According to a 2010 report from the Department of Energy Resources, on average, municipally owned electric utilities have lower rates compared with those that are investor-owned.

For instance, in Groton and Littleton, the municipal electricity departments recently lowered rates for residential customers. National Grid also lowered rates for residential customers in May.

Residents in Littleton and Boxboro, who pay the lowest rates for electricity in the state, according to the Massachusetts Municipal Wholesale Electric Co., will see a half-cent decrease in rates, which calculates into a monthly savings of $5 for the average user, according to the Littleton Electric Light Department.

Groton Electric Light recently lowered its rate by $1 for its 3,800 residential customers, according to Executive Assistant Tammi Lemire.

Meanwhile, National Grid lowered its rate for electricity for residential customers in May, which translated into about a $5 reduction in customers' monthly bills. For using 500 kilowatt hours of electricity in one month, a customer now pays $76.08, according to a press release from National Grid.

Unitil, a New Hampshire-based utility that serves Townsend, recently raised its rates, according to spokesman Alec O'Meara.

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A residential customer using 500 kilowatt hours will pay $101.40, up from $93.73. Unitil asked the Department of Public Utilities, which oversees investor-owned utilities like National Grid, NStar and Unitil, for a rate increase partly to pay for costs associated with the 2008 ice storm.

NStar did not respond to calls for comment on this article.

For example, a residential customer who uses 1,000 kilowatt hours of electricity in Littleton will pay $110.15; in Ayer, served by National Grid, a customer will pay $134.08 for the same usage; in Acton, served by NStar, he will pay $165.25; and in Townsend, a Unitil customer will pay $186.12, according to data compiled by MMWEC in June.

However, municipal utilities do make payments in lieu of taxes to municipalities.

Savos Danos, general manager of Littleton Electric Light Department, said the payment in lieu of taxes his department made to the town of Littleton this year would have exceeded the required tax payments an investor-owned utility would have made.

Another reason municipal utilities have lower rates, Danos said, is that if the municipal utility has more than a 6 percent rate of return, the excess revenue gets turned back over to the ratepayer in the form of reduced rates.

Municipal utilities are not required to participate in low-income rate programs and energy conservation programs that are required by investor-owned utilities.

Aside from lower rates, municipal utilities generally have greater response times to storms.

With the outages caused by Tropical Storm Irene on a Sunday last month, power in Littleton was restored by Monday at 8 a.m., Danos said.

In Groton, Lemire said residents were out of power for about four hours at a time.

In contrast, some customers in Unitil's service area in Massachusetts were still without power 36 hours after the storm.

Some National Grid and NStar customers were without power until five or six days after the storm, but most customers in Greater Lowell were back on by Tuesday.

One reason response times are faster for municipal utilities is that line workers live in or near the town. In Groton and Littleton, line workers are required to live within 30 minutes of the town to be able to respond quickly.

Investor-owned utilities, on the other hand, have to bring in crews, sometimes from out of state, to respond to a storm.

There are only about 40 municipal utilities in the state, and one of the reasons for that is that it is nearly impossible for a town to start its own utility.

To start a municipal utility, a town must buy all of the investor-owned utility's assets in the town or start from scratch because an investor-owned utility can deny the town's request to purchase the assets, no matter the price it is willing to pay, according to the report from DOER.

The last municipal utility was founded in 1927, according to DOER.

Patrick Mehr, of the Massachusetts Alliance for Municipal Choice, has been advocating for a change in the law since 2001.

"The 100-year-old language allows an incumbent utility to basically say no, and the only thing the town then can do is to start from scratch its own separate distribution network," Mehr said. "This was feasible 100 years ago, when a distribution system consisted of three police and three streetlights."

A bill has been filed in the state Legislature since 2004 that would no longer allow investor-owned utilities to reject a town's request to purchase its assets.

Mehr said the legislation has died each session because of extensive lobbying from those utilities.

He said it would still be a lengthy and complex process if the legislation passed, and he thinks only two or three new municipal utilities would be formed in 50 years.

After the 2008 ice storm, Townsend, served by Unitil, wanted to form its own municipal utility.

"Especially after the 2008 ice storm, it had been a real item of focus here because the response to the storm was so poor," Town Administrator Andy Sheehan said.

He said those efforts ended after the town discovered it's nearly impossible, unless the legislation on Beacon Hill passes.

"If that passes, I would expect this whole issue would come forward again," he added.

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